Navigating Farm Leases: Key Considerations for Farmers

This article was originally published by Ontario Farmer.

Introduction

In recent years, the agricultural landscape has seen a significant shift with investors and corporate groups purchasing large blocks of farmland. This trend has brought about new opportunities and challenges for farmers. Leasing land from these entities can offer farmers access to high-quality land and resources, but it also requires careful consideration to ensure a mutually beneficial arrangement. In this article, we will explore key points that farmers should consider when entering into a farm lease.

Understanding the Lease Agreement

A farm lease agreement is a legally binding document that outlines the terms and conditions under which a farmer can use the land for agricultural purposes. It is crucial for farmers to thoroughly review these lease agreements to understand their rights and responsibilities. Key elements to look for include the duration of the lease, rent payment terms, and any specific conditions related to the use of the land.

Rent and Payment Terms

One of the most important aspects of a farm lease is the rent and payment terms. Farmers should ensure that the rent is fair and manageable within their budget. The lease agreement should clearly specify the amount of rent, the payment schedule, and any additional costs that may be incurred, such as utilities or maintenance fees. If a crop share agreement is contemplated, the obligation to pay for input, maintenance and harvest, and storage and drying costs should be clearly delineated and allocated to the intended party.

Use of the Land

Farmers should pay close attention to the permitted use of the land as outlined in the lease agreement. It is essential to understand any restrictions or conditions imposed by the landlord. For instance, the lease may specify that the land can only be used for farming certain crops and may prohibit certain activities such clearing brush. Additionally, farmers should be aware of any environmental regulations and practices they must adhere to, such as soil erosion control, chemical application restrictions, and nutrient management.

Maintenance and Repairs

The lease agreement should clearly define the responsibilities for maintenance and repairs. Farmers should be prepared to maintain the leased premises in good condition and address any damage caused by their farming activities. This includes keeping buildings, equipment, and storage locations in clean and substantial repair. Obligations to repair drainage infrastructure should also be set out. Understanding these obligations can help farmers avoid disputes and ensure a collaborative and mutually beneficial leasing experience.

Termination and Renewal

Farmers should be aware of the terms related to the termination and renewal of the lease. The agreement may include provisions for early termination by the landlord or conditions under which the lease can be renewed. It is important to understand these terms to plan for the future, avoid unexpected disruptions to farming operations, and establish a cropping plan that adheres to these terms.

Insurance and Liability

Farmers should ensure that they have adequate insurance coverage for their farming operations. The lease agreement may require public liability insurance to protect against potential risks and accidents. Farmers should have their insurer review the lease to ensure appropriate insurance coverage is available.

Third-Party Rights

Farmers should be cognizant of third-party access rights granted in the lease. If lands are subject to development applications or easements, it is important to understand how these third-party rights could impact your farming operations and, if necessary, to adjust the rent or include an indemnity right favourable to the farmer for any crop damage or other costs incurred.

Conclusion

Leasing farmland from investors and corporate groups can be a viable option for farmers looking to expand their operations. However, it is essential to carefully review the lease agreement and consider all aspects of the arrangement. Often these leases are prepared by legal counsel working for investors and corporate groups that may not understand the nuances of farming.

We’re Here to Help

The lawyers of Lerners LLP have assisted many farm businesses in reaching their growth objectives. If you are considering entering into a farm lease, visit Lerners.ca or call us today at 519.640.6307 to help you ensure the terms, conditions, restrictions, and responsibilities make good business sense for your farm.